China group urges tougher restrictions on solar material imports

* Chinese polysilicon lobby steps up pressure on government

* Mainland producers suffering from drastic price declines

* Loopholes mean any new rules would have limited benefit

By Charlie Zhu

HONG KONG, July 25 Chinese manufacturers are
pressuring Beijing to take further measures to curb imports of
raw materials used to make solar panels to help revive an ailing
green-energy sector, an industry official said on Thursday.

Beijing last week slapped hefty preliminary anti-dumping
duties on imports of U.S. and South Korean solar-grade
polysilicon, which analysts say have been dominating the Chinese
market with pricing and quality advantages.

But any further restrictions would offer limited help to
China's struggling polysilicon sector partly because more than
60 percent of the country's polysilicon imports are conducted
via so-called processing trade, which is excluded from any
anti-dumping moves, industry specialists say.

Under the trade, foreign companies like Germany's Wacker
Chemie AG and South Korea's OCI Co Ltd
export polysilicon to bonded zones in China to enjoy official
tax benefits and then use the polysilicon to make products like
solar wafer, cells and panels for exports to other countries.

A Beijing-based industry lobby for China's polysilicon
sector has been urging Beijing to close the loophole and filed
another petition with China's Commerce Ministry following its
anti-dumping decision last week, the industry official said.

"We have just raised this again during our communications
with the Commerce Ministry," Ma Haitian, deputy secretary
general of the Silicon Industry of China Nonferrous Metals
Industry Association, told Reuters by phone. "We hope they would
ban polysilicon from processing trade and hence subject all
imports to the anti-dumping tariffs."

The association has been a major force pushing the Commerce
Ministry to curb polysilicon imports that exceeded $2.1 billion
in 2012. The lobby group had been working closely with major
domestic manufacturers to help the ministry collect evidence
used for the anti-dumping decision.

Beijing is charging duties of 53.3 to 57 percent on U.S.
polysilicon and 2.4 percent to 48.7 percent on imports from
South Korea. The decision took into consideration cost pressure
on Chinese solar-panel makers, analysts say.

The duties excluded sales from the European Union (EU),
which accounts for more than one-third of China's polysilicon
imports, apparently because Beijing is still seeking to defuse
its solar panel trade dispute with the group, they say. The EU
has accused China of dumping billions of euros of solar panels
in Europe below production costs and is due to decide on Aug. 6
on whether to slap punitive tariffs on Chinese solar panels.

Chinese polysilicon producers like GCL Poly and
TBEA Co Ltd have been suffering from massive price
falls following the 2008 international financial crisis, which
forced foreign governments to slash subsidies for solar power.
Global polysilicon prices have fallen to below $20 per kilogram
from their 2008 peak of nearly $400.

Domestic manufacturers have also been hurt by a spate of
cheap imports from major polysilicon producers like U.S.
companies MEMC Pasadena Inc and Hemlock Semiconductor Corp.

In the first half Of the year, China consumed 69,000 tonnes
of solar-grade polysilicon, 41,000 tonnes of which were imports,
industry figures showed. Only a handful of China's more than 40
polysilicon makers are producing and they are only operating at
a fraction of their designed capacity.

The Chinese anti-dumping tariffs may boost domestic
polysilicon prices only by 10 percent because Beijing has only
issued a tariff of 2.4-2.8 percent on two key South Korean
suppliers - OCI and Hankook Silicon Co Ltd, analysts say.

Suppliers could also export polysilicon via a third country
to China to evade the punitive tariffs.

"The help to the domestic industry from the anti-dumping
will be very weak, given all the loopholes and the low tariffs
on Korean imports," Glenn Gu, senior solar analyst with
consultancy IHS in Shanghai, said.

(Editing by Matt Driskill)

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